May | June 2013


A Penny for Your Roads?

Georgia Tries a Regional Sales Tax Increase to Fund Transportation Projects

By Sean Slone, CSG Senior Transporation Policy Analyst
July 31 could be an important day for the future of transportation in Georgia—and perhaps the nation. That’s the day of the Georgia primary, when voters in the Peach State will head to the polls to decide whether to approve a 1-cent sales tax increase.
Depending on whether they live in Atlanta, Columbus, Valdosta or Savannah, voters will make their decisions based on how they feel about a different list of carefully selected transportation projects for their region. The outcomes of the referenda in the state’s 12 regions could serve as a bellwether to other states looking for answers to their infrastructure needs and trying to move beyond the unsustainable gas tax as transportation revenue source.
“The reason we’re doing this is the current funding mechanism for transportation is not adequate in Georgia to meet all the needs,” said Todd Long, director of planning for the Georgia Department of Transportation. “The gas tax is in trouble … for a couple of different reasons. One is you and I are driving more fuel-efficient cars, so the mileage per gallon of the average American is going up and up and up.”
And gas tax revenues have started to go down.
 

Regional Option Sales Taxes

But to understand how Georgia arrived at the regional option sales tax to fund transportation projects, it’s necessary to look back more than a decade, according to Brad Alexander, a former chief of staff to Lt. Gov. Casey Cagle. Alexander now works for one of the Atlanta-area consulting firms enlisted to make the case for the referendum to Georgia voters.
“We’ve known for a long time that our tax system is just sort of fundamentally broken in Georgia when it comes to raising funds to pay for transportation infrastructure,” he said in January at the Transportation Research Board’s annual meeting in Washington, D.C. “And this sort of resulted in this annual tradition where the contracting community would come up to the Capitol at the beginning of every year and say ‘Gosh, we’re out of money. The roads are falling apart. This is terrible. Can’t you guys just vote to raise the gas tax?’
“It seemed readily apparent to the contracting community that that’s what ought to be done.”
But year after year, the contracting community was unable to convince legislators concerned about re-election to raise the tax, Alexander said.
“After about 10 years of trying this, we finally got a little bit smarter and decided that we were going to have to have a voter approval component,” he said, “because if we didn’t have a legislature that had the political courage to go raise taxes, we felt like we could at least take a shot at convincing the voters to do it.”
In 2008, a coalition began coming together to push for legislation that would authorize a referendum vote. But setbacks and tough decisions lay ahead.
“Probably the biggest mistake we made was we let our own coalition fracture,” Alexander said. “We had the contracting and consulting community over here on one side (in favor of a) statewide plan and the chambers of commerce and business community on the other side (in favor of a regional plan). And consequently, we were arguing with each other as much as we were with our opponents.”
It wasn’t until 2010 when all the stars aligned. Then-Gov. Sonny Perdue, who had previously remained on the sidelines, got involved. The contractors and the business community came together behind legislation that benefitted from lessons learned about how the project selection process should go, how to sell rural lawmakers on the idea and other issues.
 

How It Works

The General Assembly approved House Bill 277, the Georgia Transportation Investment Act, in the spring of 2010. It allows voters to decide whether to levy a 1 percent regional sales tax to fund a list of transportation projects over a 10-year period. Each of the state’s 12 regions established a Regional Transportation Roundtable—comprised of a county chair and one mayor from each county—which developed criteria for the selection of projects in consultation with Long.
“We went through a very detailed process, spelled out in the bill, of project selection. And by October of last fall, … each of the 12 regions finally adopted their list of projects for the voters to consider,” Long said.
If the referendum is approved in all the regions, up to $19 billion will be invested in the approved transportation projects. All the funds collected in a region will stay in that region; 75 percent will go to the approved regional projects and the other 25 percent will be used on local projects chosen by city and county officials. Atlanta, the state’s major population center, would receive the most—about 45 percent of total revenues.
Now comes the hard part—convincing Georgians that it’s worth paying more when they shop to allow the state to tackle these projects in less time than it would take if they had to rely on federal dollars.
Long said the message to voters is somewhat different in Atlanta and other population centers from the message in rural Georgia.
“In the rural areas, it’s all about jobs, economic growth,” he said. “Particularly in southwest Georgia; they’re really hurting for jobs. … In the doughnut counties (around Atlanta) that have really experienced a lot of growth, … and some of the other regions like Savannah, Columbus, Augusta, they have congestion relief (needs) as well.”
But Long and his colleagues at the Georgia Department of Transportation are not allowed to advocate for the referendum, so the job of doing that is now in the hands of people like Doug Callaway, executive director of the Georgia Transportation Alliance, an arm of the Georgia Chamber of Commerce. He oversees the statewide referendum campaign called Connect Georgia, which includes a bipartisan group of veteran campaign strategists.
“Someone a long time ago once said that status quo was Latin for ‘the mess we’re in,’” Callaway said. “Well almost every state’s in that same mess. The question is, ‘What are you going to do about it?’ And a lot of other states don’t have the same opportunity that Georgia does, so we hope to take full advantage of this and hope to be a model for a lot of our sister states.”
Callaway cited a recent news article in which economists predicted Georgia’s employment would not rebound to prerecession levels until 2020. While that would be daunting news for most states, Georgia can see a light at the end of the tunnel.
“At least we have an option to cast a vote in favor of ourselves later this year in order to help turn our economy around, help create jobs, help provide safe mobility for our citizens,” he said.
 

Challenges Ahead

The regional referenda still face challenges.
The Georgia Tea Party has mobilized in opposition to the tax increase. But even outside the anti-tax crowd, some question whether the sales tax is really the right vehicle to fund infrastructure, arguing it’s not a true “user fee” in the tradition of the gas tax, which is paid only by those who actually use the roads. Long sees it a different way.
“We’re paying a gas tax for our roads, but a lot of our money is going toward transit,” he said. “A sales tax is kind of universal. Everybody who buys something, that product is using the transportation system to get there. So even a guy who doesn’t have a car, but he lives in a condo and he buys, let’s say, a TV. Well that TV got to his condo somehow or other. So he’s paying a fee partly for getting that product to the end market. That’s how I look at it.”
Beyond the arguments over tax policy, another major hurdle may be when the vote is scheduled to take place—in the July primary rather than the November general election.
“The issue with the date being July 31 is the arbitrary nature of the voter profile in a primary,” said Connect Georgia’s Heath Garrett. “It creates real disparities between certain regions, because some regions have a historically high voter turnout in primaries and others don’t, and some regions have more activity on other parts of the ballot than some do.”
Still Garrett believes he and his colleagues have a strong case to make to Georgia voters.
“The bottom line is that this is the single largest economic development opportunity in the state of Georgia’s history since the Atlanta airport opened,” he said. “It’s also potentially the largest combined economic development opportunity for any state in the country in the next year, when you talk about $19 billion in direct transportation investment.
“And at the end of the day, this entire opportunity is about real job creation, not mythical job creation, both in the short term and the long term. It’s about road safety and repair. And it’s about local communities being able to control their transportation destiny locally.”
 
 
 

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